Amazon is one of—if not the most—well-known ecommerce websites in the world. You can do everything from buy and sell products to advertise and promote your brand. If you’re a small business selling on Amazon, dropshipping is one of the ways you can fulfill orders without having to keep a ton of stock on location.
Wondering how to dropship on Amazon? This guide will explain how to get started.
What Is Dropshipping?
Let’s begin with the basics—what is dropshipping exactly? In essence, when a seller chooses dropshipping over direct shipping, it means that the items listed for sale are actually coming from a third party.
When an order is placed, the seller orders that item from the third party, who then packs and ships it directly to the customer. The third party isn’t necessarily a separate seller, but might be a warehouse that’s storing all of the items listed for sale, a wholesaler, or the manufacturer of the items.
You can see how the dropshipping process works in the graphic below:
How Does Dropshipping on Amazon Work?
With this in mind, “dropshipping” on Amazon works a little differently. Dropshipping on Amazon is different from the traditional path of dropshipping because Amazon states in their policies that a seller cannot purchase products from another retailer and have that retailer ship directly to the customer.
Amazon’s dropshipping policy says that the practice is “generally acceptable” if you:
- Are the seller of record of your products
- Identify yourself as the seller on all packing slips, invoices, external packaging, and any other information included in the sale
- Remove any packing slips, invoices, external packaging, or other information that identifies a third-party dropshipper
- Be responsible for accepting and processing customer returns of your products
- Comply with all terms of your Amazon seller agreement and other applicable Amazon policies
Amazon also offers examples of dropshipping that are not allowed, including the following:
- Purchasing products from another online retailer and having that retailer ship directly to the customer, if the shipment doesn’t identify you as the seller of record or if anyone other than you appears on packing slips, invoices, or external packaging
- Shipping orders with packing slips, invoices, or other external packaging indicating a seller name or contact information other than your own
All of this being said then, dropshipping on Amazon is not true dropshipping. Instead, it looks more like this:
Although there may be some way to abide by Amazon’s strict dropshipping rules on your own, the easiest way to learn how to dropship on Amazon is to follow the path shown above and opt for Fulfillment by Amazon, or FBA.
How to Start Dropshipping on Amazon
Using FBA is Amazon’s answer to dropshipping. With FBA, Amazon will pick the items out of one of their fulfillment centers, pack and ship it to your customer, all while providing customer service for the products.
That said, in order for FBA to work, you must source inventory and send it to an Amazon fulfillment center. Then, when an item is sold, Amazon makes sure it gets to the customer.
Here’s how to dropship on Amazon:
1. Set up an FBA account.
The Amazon website outlines the necessary process for using FBA, starting with creating your Amazon seller account and then logging into the Seller Central to set up FBA.
2. Add your products.
There are restrictions on what can be sold and by whom on Amazon, so make sure you aren’t listing anything you’re not actually allowed to sell. Once you do that and list your products, you can specify items as FBA inventory.
3. Prepare your products.
Follow Amazon’s packaging guidelines and shipping and routing requirements for getting your products from your hands to the Amazon fulfillment center.
4. Ship your products to Amazon.
Once your items are ready to go, create your shipping plan, print Amazon shipment labels, and send your items off to a fulfillment center.
5. Receive and manage orders.
After Amazon receives your items at the fulfillment center, they’re then available for customers to buy. Although FBA orders are managed by Amazon, you can review the status of these orders on your “Manage Orders” page.
Pros and Cons of Amazon Dropshipping
There are certain elements of dropshipping with Amazon that benefit the seller as well as the customer, making it a viable option for anyone who wants to start an ecommerce business. However, nothing is without its downsides as well. When you dropship with Amazon, you give up some control and have stricter guidelines to follow.
Let’s look at some of the possible benefits and drawbacks of learning how to dropship on Amazon:
No Special Skills Necessary
If you’re going the dropshipping route, you don’t have to actually craft the items that you’re selling. A lot of sellers on ecommerce platforms, like Etsy, for example, are crafty people who actually hand-make the items they’re selling.
With dropshipping on Amazon, however, you don’t need to be an expert at cross-stitching or polymer clay jewelry making in order to have success.
Not Tied to a Particular Location
You can pretty much live anywhere you want and still sell the items you love. All you need is a reliable internet connection in order to communicate with your customers and Amazon, if needed.
Additionally, since you’re shipping items to Amazon, who then ships to the customer, items can be shipped from anywhere in the world.
Associated With the Amazon Name
Even though Amazon is just the platform you’re selling on, many people can’t separate the sellers on Amazon from Amazon itself. Now, we put this in the benefits section because chances are, customers will see it that way.
Of course, if there are rampant issues with products or delivery, it could create a negative association, but the Amazon name is already so established, it would take a lot of mistakes on your part to tarnish that. People trust Amazon for having fast shipping, supporting small and independent sellers, and having great customer service. Offering products and selling through FBA could yield great success for you.
More Control Over Branding
As long as you follow the packaging guidelines, you can still somewhat customize the packaging before it gets put in Amazon packaging.
You can have your Amazon store logo, brand colors, etc., incorporated into your packaging in order to create and establish a brand relationship with your customers.
Nothing comes without its disadvantages and dropshipping is no different. Since you aren’t the one actually shipping products to customers, you give up some of the control.
If the product is damaged, even though it might have been no fault of your own, you might get some negative reviews. If it’s a persistent issue, your reputation as a seller could be jeopardized.
Amazon, while “generally accepting” the dropshipping method, puts some restrictions on it in an effort to encourage people to use their Fulfillment by Amazon program.
That program definitely makes the process for sellers easier, but it comes with extra fees and another step in order to get items to your customers.
Signing up for FBA isn’t free. You’ll need to pay FBA fulfillment fees and inventory storage fees, as well as standard Amazon selling fees. All of these fees will vary depending on the type of products you sell and how much you sell, among other factors.
Although dropshipping is often considered a cheaper way to run an ecommerce business, there’s no doubt that Amazon charges a significant amount of fees for FBA.
As one of the world’s biggest online marketplaces, your ability to dropship on Amazon is not the same as it is on a standard ecommerce platform—like Shopify or Square Online Store.
Although abiding by Amazon’s regulations and using FBA isn’t the same as traditional dropshipping, there’s nothing to say that you won’t be able to find success from this route if you decide it’s the right option for you.
Jennifer Post is a freelance writer who has covered business topics including marketing, franchising, cybersecurity, health insurance, and hiring and retaining employees. She has also written about various finance topics such as startup funding, business bank accounts, retirement plans, and health insurance. Jennifer has specialized experience in social media management and knows the ins and outs of marketing a business through most social media platforms.
After briefly studying law at Widener University’s Delaware Law School, she went on to continue her small business writing career using her new legal knowledge to create content helping small businesses understand legal matters such as taxes, hiring and firing practices, harassment, and other company culture matters. You can find her work on Business.com, Business News Daily, and How Stuff Works.